‘Hero Pay’ Requirement for Grocery Workers Results in Unemployed Heroes

“Mandated “hero pay” will add up to about $0 an hour for some grocery store workers in Los Angeles. Grocers there are closing three stores in response to newly enacted legislation that requires them to pay their workers an additional $5 an hour during the pandemic.

“It’s never our desire to close a store, but when you factor in the increased costs of operating during COVID-19, consistent financial losses at these three locations, and an extra pay mandate that will cost nearly $20 million over the next 120 days, it becomes impossible to operate these three stores,” said grocery store chain Kroger in a statement given to CBS Los Angeles, announcing that two Ralphs-branded stores and one Food 4 Less location, would be shutting down.”

“The company also said it would be shutting down three underperforming stores in Seattle, Washington, in response to that city’s hazard pay law.”

“”The fallout from the misguided extra pay ordinances is enormous and politicians are to blame,” said Ruben Guerra of the Latin Business Association in a Wednesday-issued press release. “Workers will lose jobs, and communities of color will be left with fewer grocery options and more food insecurity. Consumers in other areas where grocery stores are able to stay afloat will pay higher grocery bills.””

“Supporters of hazard pay have argued that grocery stores’ record profits during the pandemic make wage premiums easily affordable, and that store closures are nothing more than cynical politics.

Profits for some grocery chains increased by as much as 100 percent during the height of the pandemic when restaurants were closed and everyone was stocking up on groceries.

The Washington branch of the United Food and Commercial Workers International Union (UFCW)—which represents grocery store workers and has been a driving force behind hero pay laws—called the store closures in Seattle “a transparent attempt to intimidate other local governments,” noting how profits for grocery store companies had “soared.”

“They absolutely can afford this increase,” Los Angeles City Councilmember Paul Koretz said in February about grocery store companies when discussing that city’s hazard pay proposal, reports the Los Angeles Times. “They absolutely should be paying this increase. And if they shut down stores, it’s just out of spite.”

Grocers counter that while their profits did go up, those increases came on top of the very slim one or two percent margins supermarkets typically earn.

A CGA-sponsored analysis of hazard pay mandates found that at $5 an hour, these laws would increase the average grocery store’s labor costs by nearly 30 percent, and their overall costs by about 5 percent. That’s about twice the profit margins most grocery store chains were making during the height of the pandemic. The same report says that those record profits are already starting to recede.

A report by Los Angeles city staff noted that the likely economic impacts of that city’s hazard pay law would be some mix of higher wages for some workers, higher prices for consumers, and the potential for companies to either close stores or delay openings, renovations, and promotions.

The debate about hazard pay laws is a very compressed version of the debate about minimum wage laws. Proponents focus on the fact that a lot of workers will get a pay increase, while detractors note the potential for higher disemployment (meaning job losses but also hours cuts and reduced hiring) and higher prices.

Unlike the minimum wage, however, the costs of hazard pay laws are obvious, immediate, and visible for everyone to see.”